UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004


(Mark One)
[X]
                                    FORM 10-Q
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the Quarterly Period Ended December 31, 2003

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[ ]                  OF THE SECURITIES EXCHANGE ACT OF 1934

         For the Transition Period from              to
                                        ------------    -------------

         Commission File Number  0-13084
                                 -------

                             WARRANTECH CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                         13-3178732
-------------------------------                         -----------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)


2200 Highway 121, Suite 100, Bedford, TX                         76021
-----------------------------------------               ------------------------
(Address of principal executive offices)                      (Zip Code)

   Registrant's telephone number, including area code   (800) 544-9510
                                                        --------------

--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)


            Indicate  by check mark  whether  the  registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__     No ____

            Indicate by check mark  whether  the  registrant  is an  accelerated
filer (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [X]

            Indicate  the number of shares  outstanding  of each of the issuer's
classes of common stock, as of the latest practicable date.

                Class                            Outstanding at January 31, 2004
---------------------------------------          -------------------------------
Common stock, par value $.007 per share                 15,371,381 shares

<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES


                                    I N D E X


                                                                        Page No.
                         PART I - FINANCIAL INFORMATION                 --------


Item 1:  Financial Statements

    Condensed Consolidated Statements of Operations -
           For the Three and Nine Months Ended December 31, 2003
           and 2002 (Unaudited)................................................2

    Condensed Consolidated Balance Sheets at December 31, 2003
           (Unaudited) and March 31, 2003......................................3

    Condensed Consolidated Statements of Cash Flows
           For the Nine Months Ended December 31, 2003
           and 2002 (Unaudited)................................................5

    Notes to Condensed Consolidated Financial Statements.......................6

Item 2:  Management's Discussion and Analysis of
           Financial Condition and Results of Operations .....................12

Item 3.  Quantitative and Qualitative Disclosures About Market Risk ..........18

Item 4.  Controls and Procedures..............................................18



                           PART II - OTHER INFORMATION


Item 1:  Legal Proceedings....................................................19

Item 2:  Changes in Securities................................................19

Item 3:  Defaults Upon Senior Securities......................................19

Item 4:  Submission of Matters to a Vote of Security Holders..................19

Item 5:  Other Information....................................................20

Item 6:  Exhibits and Reports on Form 8-K.....................................20

Signature ....................................................................21



                                       1
<PAGE>


PART I  - FINANCIAL INFORMATION


         Item 1: Financial Statements

                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       For the Three Months Ended      For the Nine Months Ended
                                                               December 31,                   December 31,
                                                       -------------------------       -------------------------
                                                           2003          2002              2003          2002
                                                       -----------   -----------       -----------   -----------
<S>                                                    <C>           <C>               <C>           <C>
Earned administrative fee (net of amortization of
deferred costs)                                        $ 8,737,105   $ 9,342,900       $26,780,041   $28,315,303
                                                       -----------   -----------       -----------   -----------
Costs and expenses
    Service, selling, and general and administrative     7,582,779     7,404,622        23,113,507    22,501,844
    Provision for bad debt expense                         165,000            --           425,000            --
    Depreciation and amortization                          718,893       835,427         2,539,866     2,880,081
                                                       -----------   -----------       -----------   -----------
Total costs and expenses                                 8,466,672     8,240,049        26,078,373    25,381,925
                                                       -----------   -----------       -----------   -----------

Income from operations                                     270,433     1,102,851           701,668     2,933,378
Other income                                               484,306       228,900         1,377,032       795,409
                                                       -----------   -----------       -----------   -----------

Income before provision for income taxes                   754,739     1,331,751         2,078,700     3,728,787
Provision for income taxes                                 301,113       307,424           628,372     1,101,574
                                                       -----------   -----------       -----------   -----------

Net income                                             $   453,626   $ 1,024,327       $ 1,450,328   $ 2,627,213
                                                       ===========   ===========       ===========   ===========

Earnings per share:
  Basic                                                $      0.03   $      0.07       $      0.09   $      0.17
                                                       ===========   ===========       ===========   ===========
  Diluted                                              $      0.03   $      0.07       $      0.09   $      0.17
                                                       ===========   ===========       ===========   ===========

Weighted average number of shares outstanding:
  Basic                                                 15,357,385    15,359,337        15,331,253    15,341,936
                                                       ===========   ===========       ===========   ===========
  Diluted                                               15,686,552    15,643,719        15,682,616    15,484,687
                                                       ===========   ===========       ===========   ===========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       2
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           (Unaudited)
                                                           December 31,      March 31,
                                                               2003            2003
                                                           -----------     -----------
<S>                                                        <C>             <C>
ASSETS

Current assets:
   Cash and cash equivalents                               $ 2,973,860     $ 5,478,095
   Investments in marketable securities                      1,657,912         843,980
   Accounts receivable, (net of allowances of
       $640,607 and $230,064, respectively)                 27,001,188      22,008,608
   Loan receivable - Butler Financial Solutions, Inc.       13,320,598       8,612,678
   Other receivables, net                                    6,773,077       5,299,887
   Deferred income taxes                                     1,872,574       2,098,171
   Employee receivables                                         58,834          73,833
   Prepaid expenses and other current assets                 1,257,298       1,218,392
                                                           -----------     -----------
      Total current assets                                  54,915,341      45,633,644
                                                           -----------     -----------

Property and equipment, net                                  6,272,229       8,296,313
                                                           -----------     -----------

Other assets:
   Excess of cost over fair value of assets acquired
       (net of accumulated amortization of $5,825,405)       1,637,290       1,637,290
   Deferred income taxes                                       650,704         800,406
   Deferred direct costs                                     5,312,889       9,972,309
   Investments in marketable securities                        710,820       1,355,263
   Restricted cash                                             825,000         825,000
   Split dollar life insurance policies                        877,126         877,126
   Notes receivable                                          7,387,250       5,411,653
   Other assets                                                 42,872          47,124
                                                           -----------     -----------
        Total other assets                                  17,443,951      20,926,171

                                                           -----------     -----------
             Total Assets                                  $78,631,521     $74,856,128
                                                           ===========     ===========
</TABLE>




     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       (Unaudited)
                                                                       December 31,        March 31,
                                                                           2003              2003
                                                                       ------------      ------------
<S>                                                                    <C>               <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current maturities of long-term debt and capital lease
       obligations                                                     $    707,587      $    802,070
     Insurance premiums payable                                          44,101,500        36,070,992
     Income taxes payable                                                   178,283            81,236
     Accounts and commissions payable                                     7,226,472         8,118,371
     Accrued expenses and other current liabilities                       4,991,711         3,534,106
                                                                       ------------      ------------
        Total current liabilities                                        57,205,553        48,606,775
                                                                       ------------      ------------

Deferred revenues                                                         8,816,766        15,065,547
Long-term debt and capital lease obligations                              1,122,976         1,218,670
Deferred rent payable                                                       365,689           417,720
                                                                       ------------      ------------
   Total liabilities                                                     67,510,984        65,308,712
                                                                       ------------      ------------

Commitments and contingencies                                                    --                --

Stockholders' equity:
    Preferred stock - $.0007 par value authorized - 15,000,000
      Shares
       issued  - none at December 31, 2003 and March 31, 2003                    --                --
    Common stock - $.007 par value authorized - 30,000,000 Shares
       issued  - 16,558,988 shares at December 31, 2003 and
       16,530,324 shares at March 31, 2003                                  115,915           115,714
    Additional paid-in capital                                           23,779,669        23,760,809
    Loans to directors and officers                                     (10,676,516)      (10,462,094)
    Accumulated other comprehensive income (loss), net of taxes              34,070          (196,974)
    Retained earnings                                                     2,054,956           604,631
                                                                       ------------      ------------
                                                                         15,308,094        13,822,086
   Treasury stock - at cost, 1,187,607 shares at December 31, 2003
       and 1,249,690 shares at March 31, 2003                            (4,187,557)       (4,274,670)
                                                                       ------------      ------------
          Total Stockholders' Equity                                     11,120,537         9,547,416
                                                                       ------------      ------------

                                                                       ------------      ------------
             Total Liabilities and Stockholders' Equity                $ 78,631,521      $ 74,856,128
                                                                       ============      ============
</TABLE>





     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              For the Nine Months Ended
                                                                     December 31,
                                                             --------------------------
                                                                 2003           2002
                                                             -----------    -----------
<S>                                                          <C>            <C>
Cash flows from operating activities:
  Net income                                                 $ 1,450,327    $ 2,627,213
                                                             -----------    -----------
  Adjustments to reconcile net income to net cash
     provided by operating                                     3,766,499     (2,565,078)
                                                             -----------    -----------
Net cash flows provided by operating activities                5,216,826         62,135
                                                             -----------    -----------

Cash flows from investing activities:
   Property and equipment purchased                             (201,046)    (2,179,395)
   Purchase of marketable securities                            (920,000)      (990,000)
   Proceeds from sales of marketable securities                  730,000        945,000
                                                             -----------    -----------
Net cash used in investing activities                           (391,046)    (2,224,395)
                                                             -----------    -----------

Cash flows from financing activities:
    Issuance of common stock                                      18,868          2,100
    Purchase treasury stock                                           --       (196,698)
    Increase in loans and notes receivable                    (6,683,517)      (791,953)
    Repayments, notes and capital leases                        (665,366)      (625,981)
                                                             -----------    -----------
Net cash used in financing activities                         (7,330,015)    (1,612,532)
                                                             -----------    -----------

Net decrease in cash and cash equivalents                     (2,504,235)    (3,774,792)

Cash and cash equivalents at beginning of period               5,478,095      7,033,448
                                                             -----------    -----------
Cash and cash equivalents at end of period                   $ 2,973,860    $ 3,258,656
                                                             -----------    -----------

Supplemental cash flow information:
Cash payments for:
   Interest                                                  $   497,816    $   161,501

   Income taxes                                              $   148,612    $(1,244,556)
                                                             -----------    -----------

Non-cash investing and financing activities:
    Property and equipment financed through capital leases   $   487,060    $   115,745
    Increase in loans to officers and directors              $  (214,422)   $  (228,045)
    Issuance of treasury stock                               $    87,113    $   197,202
</TABLE>





     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003
                                   (UNAUDITED)

1. THE COMPANY

Warrantech,  through its wholly  owned  subsidiaries,  markets  and  administers
service contracts,  extended  warranties and replacement plans. The Company is a
third party administrator for a variety of dealer/clients in selected industries
and offers call center and  technical  computer  services.  The Company  assists
dealer/clients  in obtaining  insurance  policies from highly rated  independent
insurance  companies  for all  contracts  and programs  offered.  The  insurance
company is then  responsible  for the cost of repairs  or  replacements  for the
contracts administered by Warrantech.

The Company's service contract programs benefit consumers by providing them with
expanded and/or extended product coverage for a specified period of time (and/or
mileage in the case of automobiles and recreational  vehicles),  similar to that
provided by manufacturers under the terms of their product warranties.  Coverage
generally provides for the repair or replacement of the product,  or a component
thereof,  in the event of its failure.  The Company's  service contract programs
benefit the dealer/clients by providing enhanced value to the goods and services
they offer and by providing them with the opportunity for increased  revenue and
income without the costs and  responsibilities of operating an extended warranty
program.

The service contracts,  extended warranties and replacement  contracts generally
have terms ranging from three (3) to one hundred twenty (120) months.  Since the
Company  acts  solely  as  a  third  party   administrator   on  behalf  of  the
dealer/clients and insurance  companies,  the actual repairs and/or replacements
required  under  the  agreements  are  performed  by  independent   third  party
authorized repair  facilities or dealers.  The cost of repairs is generally paid
for by the insurance  companies which have the ultimate  responsibility  for the
claims or by Butler Financial Solutions,  LLC ("Butler"),  if Reliance Insurance
Company  ("Reliance")  or the  Company  is the  obligor.  The  insurance  policy
indemnifies the  dealer/clients  against losses  resulting from service contract
claims and protects consumers by ensuring their claims will be paid.

2. BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  have  been  prepared  by
management  and are  unaudited.  These interim  financial  statements  have been
prepared on the basis of accounting  principles generally accepted in the United
States of  America  ("GAAP")  for  interim  financial  information  and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all  information  and footnotes  required by  accounting  principles
generally  accepted  in the United  States of  America  for  complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for  a  fair  presentation  of  the
financial  position and operating  results of the Company for the interim period
have been  included.  Operating  results  for the three  and nine  months  ended
December  31, 2003 are not  necessarily  indicative  of the results  that may be
expected  for the fiscal year ending March 31,  2004.  For further  information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended March 31, 2003.

3. RESTATEMENT

The Company's  financial  statements  for the three months and nine months ended
December  31,  2002,  have been  restated  to  reflect  a change  in  accounting
treatment in calculating net earned  administrative fees as more fully described
in the  Company's  Annual  Report on Form 10K for the year ended March 31, 2003.
For certain  contracts,  the Company  previously  had  deferred a portion of the
revenue and would recognize such deferred  revenue at the cancellation or end of
the contract's  term. The Company is now recognizing  this revenue over the life
of the contract's term.



                                       6
<PAGE>


       The effect of this restatement for the three months and nine months ended
December 31, 2002 is as follows:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED           NINE MONTHS ENDED
                                                        DECEMBER 31, 2002            DECEMBER 31, 2002
                                                  --------------------------------------------------------
                                                      AS                            AS
                                                  PREVIOUSLY                    PREVIOUSLY
                                                   REPORTED      AS RESTATED     REPORTED      AS RESTATED
                                                  --------------------------    --------------------------
<S>                                               <C>            <C>            <C>            <C>
Statement of operations:
Earned administrative fee (net of amortization
  of deferred costs)                              $ 9,339,050    $ 9,342,900    $28,303,751    $22,315,303
Income from operations                              1,099,001      1,102,851      2,921,826      2,933,378
Income before provision for income taxes            1,327,901      1,331,751      3,717,235      3,728,787
Provision for income taxes                            306,049        307,424      1,097,456      1,101,574
Net income                                        $ 1,021,852    $ 1,024,327    $ 2,619,779    $ 2,627,213

Earnings per share:
Basic                                                   $0.07          $0.07          $0.17          $0.17
                                                        =====          =====          =====          =====
Diluted                                                 $0.07          $0.07          $0.17          $0.17
                                                        =====          =====          =====          =====
</TABLE>


4. NOTES RECEIVABLE

Butler serves as the ultimate obligor under  predominantly all service contracts
administered by the Company in exchange for a fee. Some of the service contracts
under which Butler is the obligor  were insured by Reliance and the  liquidation
of Reliance has eliminated the insurance coverage to Butler.

To pay these Reliance obligations,  the primary funding to Butler is provided by
a special surcharge,  payable on certain vehicle service contracts  administered
by the Company sold after  November 19, 2001. The surcharge is payable by agents
through whom Reliance-insured service contracts were sold.

For any  shortfall  between  the claims  obligations  being paid and the special
surcharge,  Warrantech  is  assisting  Butler  by  providing  loans  to  Butler.
Warrantech  Automotive  made an initial $1  million  loan to Butler and  further
loans through December 31, 2003 of $19,731,095.

Additionally,  it will  continue to assist  Butler in  addressing  its potential
obligations under the service contracts previously insured by Reliance for which
Butler is, or the dealer or Warrantech  was, the obligor,  by providing  further
loans,  as necessary,  for claims  obligations  in excess of Butler's  surcharge
revenues.  Subject to the terms of the agreement between the Company and Butler,
the Company has and will make further loans to Butler, as necessary,  for claims
obligations in excess of Butler's surcharge revenues.  All of Warrantech's loans
to Butler bear interest at the rate of prime plus 2% per annum and will begin to
be paid down once Butler's fee revenues exceed the claims obligations.

Through  December 31, 2003,  Warrantech has loaned Butler  $20,731,095.  Of that
amount,  Reliance  Warranty  Corporation  ("RWC")  is  obligated  to pay  Butler
$13,320,598.  On January 20, 2004, the Company  collected the  $13,320,598  from
RWC,  which is  reflected as a "Loan  Receivable"  on the  Consolidated  Balance
Sheet.  The  remaining  amount   representing  the  loans  due  from  Butler  of
$7,410,497 at  December 31, 2003, is  classified  as "Notes  Receivable"  on the
Consolidated Balance Sheet (See Note 8).

The  following  table sets forth the  carrying  amounts  and fair  values of the
Company's notes and other receivables at December 31, 2003.

<TABLE>
<CAPTION>
                                     2004       2005       2006          2007       2008   THEREAFTER     TOTAL       FAIR VALUE
                                     ----       ----       ----          ----       ----   ----------     -----       ----------
<S>                               <C>            <C>     <C>          <C>            <C>       <C>     <C>            <C>
Notes Receivable -
  Butler Equals 2% above prime             --    --      2,563,129    $ 4,847,368    --        --      $ 7,410,497    $ 7,410,497
Loan Receivable - Butler;
  Equals 2% above prime           $13,320,598    --             --             --    --        --      $13,320,598    $13,320,598
</TABLE>



                                       7
<PAGE>


5. COMPREHENSIVE INCOME

         The components of comprehensive income are as follows:

<TABLE>
<CAPTION>
                                              For the Three Months Ended     For the Nine Months Ended
                                                     December 31,                   December 31,
                                              --------------------------    --------------------------
                                                   2003          2002           2003           2002
                                              -----------    -----------    -----------    -----------
<S>                                           <C>            <C>            <C>            <C>
Net income                                    $   453,626    $ 1,024,327    $ 1,450,328    $ 2,627,213
Other Comprehensive Income, net of tax:
   Unrealized gains (losses) on investments       (11,262)         1,703        (14,704)        20,123
   Foreign currency translation adjustments       222,711        (39,535)       245,747        (46,641)
                                              -----------    -----------    -----------    -----------
Comprehensive Income                          $   665,075    $   986,495    $ 1,681,371    $ 2,600,695
                                              ===========    ===========    ===========    ===========

Comprehensive income per share                $      0.04    $      0.06    $      0.11    $      0.16
                                              ===========    ===========    ===========    ===========
</TABLE>

The components of accumulated  comprehensive income, net of related tax, for the
periods ended December 31, 2003 and March 31, 2003, are as follows:

                                                    December 31,    March 31,
                                                        2003           2003
                                                    ------------    ---------
Unrealized gain on investments                       $   3,343      $  18,046
Accumulated translation adjustments                     30,727       (215,020)
                                                     ---------      ---------
Accumulated other comprehensive income               $  34,070      $(196,974)
                                                     =========      =========


6. EARNINGS PER SHARE

         The computations of earnings per share are as follows:

<TABLE>
<CAPTION>
                                             For the Three Months Ended  For the Nine Months Ended
                                                     December 31,               December 31,
                                             -------------------------   -------------------------
                                                 2003          2002          2003          2002
                                             -----------   -----------   -----------   -----------
<S>                                          <C>           <C>           <C>           <C>
Numerator:
   Net income applicable to common stock     $   453,626   $ 1,024,327   $ 1,450,328   $ 2,627,213
                                             ===========   ===========   ===========   ===========
Denominator:
    Average outstanding shares used in the
      computation of per share earnings:
       Common Stock issued-Basic shares       15,357,385    15,359,337    15,331,253    15,341,936
       Stock Options (treasury method)           329,167       284,382       351,363       142,751
                                             -----------   -----------   -----------   -----------
       Diluted shares                         15,686,552    15,643,719    15,682,616    15,484,687
                                             ===========   ===========   ===========   ===========
Earnings Per Common Share:
   Basic                                     $      0.03   $      0.07   $      0.09   $      0.17
                                             ===========   ===========   ===========   ===========
   Diluted                                   $      0.03   $      0.07   $      0.09   $      0.17
                                             ===========   ===========   ===========   ===========
</TABLE>



                                       8
<PAGE>


7. STOCK OPTION PLAN

In December 2002, the FASB issued  Statement of Financial  Accounting  Standards
No. 148,  "Accounting for Stock-Based  Compensation - Transition and Disclosure,
an Amendment of FASB  Statement  No. 123" (SFAS No. 148).  SFAS No. 148 provides
alternative  methods of transition  for companies  making a voluntary  change to
fair value-based accounting for stock-based employee  compensation.  The Company
continues  to  account  for its stock  option  plan  under the  intrinsic  value
recognition  and measurement  principles of APB Opinion No. 25,  "Accounting for
Stock Issued to Employees," and related  Interpretations.  Effective for interim
periods beginning after December 15, 2002, SFAS No. 148 also requires disclosure
of pro-forma results on a quarterly basis as if the Company had applied the fair
value recognition provisions of SFAS No. 123.

As the  exercise  price of all  options  granted  under the plan was equal to or
above the market  price of the  underlying  common  stock on the grant date,  no
stock-based  employee  compensation  is recognized in net income.  The following
table illustrates the effect on net income and earnings per share if the company
had applied the fair value  recognition  provisions of SFAS No. 123, as amended,
to options  granted  under the stock  option  plans and rights to acquire  stock
granted  under the  company's  Stock  Participation  Plan,  collectively  called
"options." For purposes of this pro-forma  disclosure,  the value of the options
is estimated using the Black-Scholes  option pricing model and amortized ratably
to expense over the options'  vesting  periods.  Because the estimated  value is
determined as of the date of grant, the actual value ultimately  realized by the
employee may be significantly different.

<TABLE>
<CAPTION>
                                            FOR THE THREE MONTHS ENDED        FOR THE NINE MONTHS ENDED
                                                   DECEMBER 31,                      DECEMBER 31,
                                        -----------------------------------------------------------------
                                             2003               2002            2003            2002
                                        ---------------    ---------------  --------------  -------------
<S>                                           <C>              <C>             <C>            <C>
Net income as reported                        $453,626         $1,024,327      $1,450,328     $2,627,213
Net income pro forma                          $426,311         $1,007,455      $1,387,096     $2,577,950
Shares - Basic                              15,357,385         15,359,337      15,331,253     15,341,936
Basic earnings per share as reported             $0.03              $0.07           $0.09          $0.17
Basic earnings per share pro forma               $0.03              $0.07           $0.09          $0.17
</TABLE>


The fair value of Warrantech  stock options used to compute pro forma net income
and earnings per share  disclosures  is the estimated  value at grant date using
the  Black-Scholes  option-pricing  model with the  following  weighted  average
assumptions  for the three  months and year ended  December  31,  2003 and 2002,
respectively: expected dividend yield of 0%; expected volatility of 30% - 50%; a
risk free  interest  rate of 4.0% - 5.0%;  and  expected  option life of 3 to 10
years.

Presented  below is a summary of the status of the stock options in the plan and
the related transactions for the nine months ended December 31, 2003 and 2002.

<TABLE>
<CAPTION>
                                                           2003                  2002
                                                 --------------------------------------------
                                                              WEIGHTED                WEIGHTED
                                                               AVERAGE                AVERAGE
                                                              EXERCISE                EXERCISE
                                                    SHARES      PRICE       SHARES     PRICE
                                                 --------------------------------------------
<S>                                                <C>          <C>       <C>           <C>
Options outstanding at beginning of the period     1,306,380    $1.10     1,416,283     $1.54
Granted                                              180,000     1.57       215,238      0.42
Canceled/Surrendered                                      --       --        (5,000)    (0.42)
Exercised                                                 --       --            --        --
Forfeited                                                 --       --            --        --
                                                 --------------------------------------------
Options outstanding at end of period               1,464,163    $1.93     1,581,521     $1.31
                                                 ============================================

                                                 --------------------------------------------
Options exercisable at end of period                 637,097    $1.34       610,111     $1.21
                                                 ============================================
</TABLE>



                                       9
<PAGE>


The weighted  average fair value of stock  options at date of grant,  calculated
using the  Black-Scholes  option-pricing  model,  during the nine  months  ended
December 31, 2003 and 2002 was is $0.54 and $0.48, respectively.

The  Company  may issue  options  to  purchase  the  Company's  common  stock to
officers, non-employees, non-employee directors or others as part of settlements
in disputes and/or  incentives to perform services for the Company.  The Company
accounts for stock options  issued to vendors and  non-employees  of the Company
under SFAS No. 123 "Accounting for Stock-based  Compensation." The fair value of
each option  grant is  estimated  on the date of grant  using the  Black-Scholes
option-pricing  model  is  charged  to  operations  utilizing  weighted  average
assumptions identical to those used for options granted to employees.

The following  table  summarizes  the status of all  Warrantech's  stock options
outstanding and exercisable at December 31, 2003.

<TABLE>
<CAPTION>
                                       STOCK OPTIONS                  STOCK OPTIONS
                                        OUTSTANDING                    EXERCISABLE
                               -----------------------------   ---------------------------
                                                  WEIGHTED                      WEIGHTED
                                                  AVERAGE                       AVERAGE
                                                  EXERCISE                      EXERCISE
RANGE OF EXERCISE PRICES           SHARES          PRICE          SHARES         PRICE
------------------------       --------------   ------------   ------------   ------------
<C>                                <C>                <C>        <C>                <C>
$0.67 to $0.94                       792,642          $0.69        382,404          $0.66
$1.26 to $1.595                      700,231          $1.39        443,231          $1.33
$2.00                              4,650,000          $2.00      3,000,000          $2.00
$3.25 to $3.375                      101,290          $3.26        101,290          $3.26
                               --------------   ------------   ------------   ------------
Total at December 31, 2003         6,244,163          $1.79      3,926,925          $1.83
                               ==============   ============   ============   ============
</TABLE>

On October 1, 2002,  as part of an  agreement  between  the  Company and GAIC to
provide extended credit terms, GAIC received options to purchase up to 1,650,000
shares of common  stock at an  exercise  price of $2.00  per  share  (the  "GAIC
Options"). The GAIC options are exercisable between January 1, 2006 and December
31, 2006. In the event that Warrantech common stock price did not trade above $2
per share for ten  consecutive  trading  days  prior to  January  1,  2004,  the
exercise  price  of the  option  was  automatically  reduced  to $1  per  share.
Accordingly,  the GAIC options were repriced to $1 per share on January 1, 2004.
Based on the Emerging Issues Task Force ("EITF") pronouncement number 96-18, the
repricing  had no  effect  on the  Company's  Results  of  Operations.  If  GAIC
exercises  all of  these  options,  it  would  own  approximately  10.8%  of the
Company's outstanding shares.

8. SEGMENTS

The Company  operates in three major  business  segments:  Automotive,  Consumer
Products and  International.  The  Automotive  segment  markets and  administers
extended  warranties on  automobiles,  light trucks,  motorcycles,  recreational
vehicles and automotive components, which are sold principally by franchised and
independent  automobile  and  motorcycle  dealers,  leasing  companies,   repair
facilities, retail stores, financial institutions and other specialty marketers.
The  Consumer  Products  segment  develops,  markets  and  administers  extended
warranties  and product  replacement  plans on  household  appliances,  consumer
electronics,  televisions,  computers,  home office equipment,  jewelry, musical
instruments  and  homes  and  which  are  sold  principally  through  retailers,
distributors, manufacturers, utility companies, financial institutions and other
specialty marketers. Warrantech also markets these warranties and plans directly
to  the  ultimate  consumer  on  behalf  of  the   retailer/dealer   and/or  the
manufacturer through telemarketing and direct mail campaigns.  The International
segment markets and administers  predominately the same products and services as
the other business segments. The International segment is currently operating in
Central and South  America,  Puerto  Rico and the  Caribbean.  "Other"  includes
intersegment  eliminations  of  revenues  and  receivables  and net  unallocated
corporate expenses.



                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                CONSUMER                        REPORTABLE
NINE MONTHS ENDED              AUTOMOTIVE       PRODUCTS       INTERNATIONAL     SEGMENTS          OTHER            TOTAL
DECEMBER 31, 2003            ------------     ------------     ------------    ------------     ------------     ------------
-----------------
<S>                          <C>              <C>              <C>             <C>              <C>              <C>
Earned administrative fee
  (net)                      $  9,465,028     $ 13,008,780     $  4,030,928    $ 26,504,736     $    275,305     $ 26,780,041
Income (loss) from
  operations                    2,927,918        2,743,667        1,110,922       6,782,507       (6,080,840)         701,668
Pretax income (loss)           (1,780,190)       1,424,799        1,150,093         794,702         (166,330)         628,372
Net interest income
  (expense)                      (275,740)         (37,136)          11,130        (301,746)       1,146,239          844,493
Depreciation/amortization         286,556        1,043,553           62,168       1,392,277        1,147,589        2,539,866
Total assets                   44,919,002       21,458,946        4,740,008      71,117,956        7,513,565       78,631,521

DECEMBER 31, 2002
-----------------
Earned administrative fee
  (net)                      $ 14,661,922     $ 11,542,144     $  2,349,442    $ 28,553,508         (238,205)    $ 28,315,303
Income (loss) from
  operations                    8,726,480        1,512,693           75,092      10,314,265       (7,380,887)       2,933,378
Pretax income (loss)            3,357,804         (333,797)          69,565       3,093,572          635,215        3,728,787
Net interest income                    20           (8,818)           7,567          (1,231)         524,160          522,929
Depreciation/amortization         284,360        1,276,497           64,480       1,625,337        1,254,744        2,880,081
Total assets                   40,231,095       25,268,416        3,314,225      68,813,736        5,818,912       74,632,648

<CAPTION>
                                                CONSUMER                        REPORTABLE
QUARTER ENDED                  AUTOMOTIVE       PRODUCTS       INTERNATIONAL     SEGMENTS          OTHER            TOTAL
DECEMBER 31, 2003            ------------     ------------     ------------    ------------     ------------     ------------
-----------------
<S>                          <C>              <C>              <C>             <C>              <C>              <C>
Earned administrative fee
  (net)                      $  2,564,490     $  4,981,853     $  1,068,840    $  8,615,183     $    121,922     $  8,737,105
Profit (loss) from
  operations                      471,704        1,714,119          148,199       2,334,022       (2,063,589)         270,433
Pretax income (loss)           (1,185,091)       1,236,006          187,589         238,503          516,235          754,739
Net interest income                 7,387            3,885            4,841          16,113          516,195          532,308
Depreciation/amortization          93,663          239,298           18,526         351,487          367,406          718,893

DECEMBER 31, 2002
-----------------
Earned administrative fee
  (net)                      $  4,103,519     $  4,439,082     $    872,352    $  9,414,953     ($    72,053)    $  9,342,900
Profit (loss) from
  operations                    2,075,684          992,244           55,025       3,122,953       (2,020,102)       1,102,851
Pretax income (loss)              638,425          432,918           53,820       1,125,163          206,588        1,331,751
Net interest income                11,050            4,879              726          16,655          207,320          223,975
Depreciation/amortization          89,623          399,608           21,721         510,952          324,475          835,427
</TABLE>


9. SUBSEQUENT EVENT

On  January  16,  2004,  as  part  of the  Reliance  Insurance  Inc.  bankruptcy
settlement,   Reliance   Warranty  Company  was  acquired  by  Butler  Financial
Solutions,  LLC. Also, as part of the settlement,  Staples and Warrantech agreed
to cancel  Staples  options to purchase  1,000,000  shares of Warrantech  common
stock.  Subsequently,  on  January  20,  2004  Reliance  Warranty  Company  paid
Warrantech  $13,910,622,  which  was  due  to  Warrantech  for  claims  paid  by
Warrantech  through that date, on behalf of Reliance Warranty Company.  The cash
received  by  Warrantech  was  partially  used to reduce its  insurance  premium
payables and increase available working capital.



                                       11
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Except for the historical  information  contained herein,  the matters discussed
below or  elsewhere  in this  report  on Form 10-Q may  contain  forward-looking
statements that involve risks and uncertainties  that could cause actual results
to differ materially from those contemplated by the forward-looking  statements.
The Company makes such  forward-looking  statements  under the provisions of the
"safe harbor" section of the Private  Securities  Litigation Reform Act of 1995.
Forward-looking statements reflect the Company's views and assumptions, based on
information  currently  available to management.  Such views and assumptions are
based on, among other things, the Company's operating and financial  performance
over recent  years and its  expectations  about its business for the current and
future fiscal years.  When used in this Quarterly Report on Form 10-Q, the words
"believes,"  "estimates,"  "plans,"  "expects,"  and  "anticipates"  and similar
expressions  as they relate to the  Company or its  management  are  intended to
identify forward-looking statements.

Although  the  Company   believes  that  the   expectations   reflected  in  the
forward-looking  statements  are  reasonable,  it can give no assurance that its
expectations  will prove to be correct.  These statements are subject to certain
risks,  uncertainties  and  assumptions,  including,  but not  limited  to,  (a)
prevailing  economic  conditions which may  significantly  deteriorate,  thereby
reducing the demand for the Company's products and services, (b) availability of
technical  support  personnel  or  increases  in the  rate of  turnover  of such
personnel,  resulting from increased  demand for such qualified  personnel,  (c)
changes in the terms or  availability  of insurance  coverage for the  Company's
programs,  (d) regulatory or legal changes affecting the Company's business, (e)
loss of business from, or significant  change in  relationships  with, any major
customer,  (f) the ability to  successfully  identify  and contract new business
opportunities, both domestically and internationally,  (g) the ability to secure
necessary capital for general operating or expansion  purposes,  (h) the adverse
outcome of litigation  ,(i) the non-payment of notes due in 2007 from an officer
and two  directors of the  Company,  (j) the  inability of any of the  insurance
companies which insure the service  contracts  marketed and  administered by the
Company to pay the claims  under the service  contracts,  (k) the  inability  of
Butler to pay the claims previously insured by Reliance,  (l) the termination of
extended credit terms being provided by the Company's current insurance company,
(n) the  outcome of the review  currently  being  conducted  by the staff of the
Securities and Exchange Commission ("SEC") of the Company's financial statements
and  related  disclosures,  and (m) the  Company's  ability  to expand  its core
business and to increase its profit margin on its overall business..  Should one
or more of these or any other risks or uncertainties materialize or develop in a
manner adverse to the Company,  or should the Company's  underlying  assumptions
prove  incorrect,  actual  results of  operations,  cash flows or the  Company's
financial  condition may vary  materially from those  anticipated,  estimated or
expected  and  there  could be a  materially  adverse  effect  on the  Company's
business.

SEC REVIEW OF THE COMPANY'S FILINGS

In March of 2003,  the Staff of the Division of  Corporation  Finance of the SEC
selected  certain of the Company's  periodic  reports for review,  including the
Annual  Report on Form 10-K for the  fiscal  year ended  March 31,  2002 and the
Quarterly  Reports on Form 10-Q for the periods  ended June 30, 2002,  September
30, 2002 and December 31, 2002.  The staff informed the Company that the purpose
of the  review  is to assist  the  Company  in its  compliance  with  applicable
disclosure  requirements and to enhance the overall  disclosure in the Company's
reports.

In the course of its review,  the staff requested  clarification  of some of the
Company's  disclosures  and items in its  financial  statements  and the Company
agreed to amend  certain of them on a  going-forward  basis.  The  Company  also
amended  certain of its  disclosures  as reflected in its Annual Report filed on
Form 10-K for the fiscal year ended March 31, 2003 and  restated  its  financial
statements for prior periods to reflect  certain  changes in accounting  policy.
The  cumulative  effect of the  change to prior  periods  was a net  benefit  of
$1,721,184 to retained earnings.

The Company is still in  discussions  with the SEC Staff on the  complex  issues
regarding the Company's  accounting  treatment with respect to Butler  Financial
Solutions,  LLC  ("Butler"),  claims  obligations  under the  service  contracts
administered by the Company,  consideration of consolidating Butler as a special
purpose entity and the recognition of revenue from the administration of service
contracts.


                                       12
<PAGE>


As a result of the  comments  from the SEC  Staff,  the Audit  Committee  of the
Company's Board of Directors retained a separate independent  accounting firm to
review  the  accounting  and  disclosure  issues  raised by the SEC staff in its
comment  letters  and  report to the  Committee  on its  conclusions.  The Audit
Committee  received  the report in December of 2003 ("the  Special  Accountant's
Report").   The  Special   Accountant's  Report  proposed  different  accounting
treatments  than those  utilized  by the  Company  or raised by the SEC  staff's
comment letters.  The Company's regular  independent  auditing firm has informed
the Audit  Committee that they concur with the accounting  treatment used by the
Company.

After receiving the Special Accountant's Report, the Audit Committee submitted a
formal  request  to the SEC's  Office of Chief  Accountant  for its views on the
issues over which there is disagreement. Representatives of the Company met with
the SEC staff to discuss  the  accounting  issues,  and the Audit  Committee  is
awaiting the SEC staff's views on these issues.

If the  Company  determines  that it  should  follow  the  accounting  treatment
recommended in the Special  Accountant's  Report, such changes could result in a
materially  adverse change in the  presentation  of the Company's past financial
results,  resulting in a restatement  of prior period  financial  statements and
also of current  shareholders  equity,  and a  corresponding  positive change in
future results.  Since the accounting issues are still under review, the Company
has not made a  determination  at this time  whether  any such  changes  will be
required.

RESULTS OF OPERATIONS

                                 GROSS REVENUES

<TABLE>
<CAPTION>
                                    FOR THE THREE MONTHS ENDED          FOR THE NINE MONTHS ENDED
                                           DECEMBER 31,                        DECEMBER 31,
                                 -------------------------------     -------------------------------
                                      2003              2002              2003              2002
                                 -------------     -------------     -------------     -------------
<S>                              <C>               <C>               <C>               <C>
Automotive segment               $  22,552,246     $  25,080,875     $  80,575,476     $  77,629,112
Consumer Products segment           12,082,939        10,785,133        32,427,210        28,217,706
International segment                2,103,230         1,592,983         6,664,611         4,106,799
Other                                 (210,157)          (72,052)         (710,761)         (238,203)
                                 -------------     -------------     -------------     -------------
     Total gross revenues        $  36,528,258     $  37,386,939     $ 118,956,536     $ 109,745,414
                                 =============     =============     =============     =============
</TABLE>

Gross  revenues  for the three month period  ended  December 31, 2003  decreased
$858,681, or 2%, over the same period in 2002. The Automotive segment reported a
decrease in gross  revenues of 10% in the three month period ended  December 31,
2003 over 2002,  due primarily  from the loss of sales volume caused by weakness
in its core dealer  business.  Although  gross revenues in Puerto Rico were down
due to the severance of the Company's  relationship with an automotive insurance
carrier,  the International  segment  experienced  higher sales volumes in South
America, resulting in a $510,247 or 32% increase in the three month period ended
December 31, 2003. The Consumer Products segment also reported a 12% increase in
gross  revenues  during the three month period ended December 31, 2003, as sales
increased from its top customers and new customers.

Gross  revenues  for the nine month period  ended  December  31, 2003  increased
$9,211,122, or 8%, over the same period in 2002. The Automotive segment reported
a  $2,946,364,  or 4%,  increase in gross  revenue due to higher unit volumes in
both its  reinsurance  business  and from direct  marketers.  For the nine month
period ended December 31, 2003, the International segment reported a $2,557,812,
or 62%,  increase in revenues as the Company  increased  its  customers'  market
share.  The  Consumer  Products  segment  also  reported a 15% increase in gross
revenues  during  the nine  month  period  ended  December  31,  2003,  as sales
increased from its top customers.

                         NET EARNED ADMINISTRATIVE FEES

<TABLE>
<CAPTION>
                              FOR THE THREE MONTHS ENDED        FOR THE NINE MONTHS ENDED
                                     DECEMBER 31,                      DECEMBER 31,
                             ------------    ------------     ------------    ------------
                                 2003            2002              2003            2002
                             ------------    ------------     ------------    ------------
<S>                          <C>             <C>              <C>             <C>
Automotive segment           $  2,564,490    $  4,103,519     $  9,465,028    $ 14,661,922
Consumer Products segment       4,981,853       4,439,082       13,008,780      11,542,144
International segment           1,068,840         872,352        4,030,928       2,349,442
Other                             121,922         (72,053)         275,305        (238,205)
                             ------------    ------------     ------------    ------------
   Total net earned
     administrative fee      $  8,737,105    $  9,342,900     $ 26,780,041    $ 28,315,303
                             ============    ============     ============    ============
</TABLE>


                                       13
<PAGE>


Net earned  administrative  fees are gross  revenues  less  directs  costs,  the
combined sum of net premiums,  commissions  and sales  allowances  plus or minus
deferred  revenue.  Net earned  administrative  fees for the three  months ended
December 31, 2003 were $8,737,105  compared to $9,742,900 for the same period in
the  prior  year.  For  the  first  nine  months  of  fiscal  2004,  net  earned
administrative   fees  were   $26,780,041   compared  to  $28,315,303   for  the
corresponding  period last year. The reduction in net earned  administrative fee
for the three months and nine months ended  December 31, 2003 was due  primarily
to lower  sales  volumes in the  Automotive  segment  and higher  amounts of net
deferred  revenue  recognized  last year.  During the three month  period  ended
December 31, 2003, net deferred revenue was $404,238 compared to $985,033 in the
same period for 2002.  For the nine months ended December 31, 2003, net deferred
revenue was  $1,418,728  compared to  $2,497,946 in the same period in the prior
year.

The Automotive segment's net earned administrative fee was $2,564,490 during the
third quarter of 2004, a reduction of $1,539,029  from the $4,103,519 net earned
administrative fee in the same quarter 2003. This resulted from a sales weakness
in its core  business,  lower  margins due to product mix and lower net deferred
revenue recognized during the period. net deferred revenue for the third quarter
2004 was  $315,383  compared to  $821,665 in 2003.  For the first nine months of
fiscal 2004,  Automotive  segment net earned  administrative  fee was $9,465,028
compared to $14,661,922  during the same period in 2003.  This was the result of
lower volume resulting from sales weakness from its core business, lower margins
due to product mix and lower net deferred revenues  recognized this period.  For
the nine month ended  December  31,  2003,  net  deferred  revenue was  $840,209
compared to $2,440,110 for the same period in the prior year.

The net  earned  administrative  fee  for  the  Consumer  Products  segment  was
$4,981,853 in the third quarter of fiscal 2004,  compared to $4,439,082  for the
same quarter in the previous year. For the nine-month period of fiscal 2004, net
earned  administrative  fees for the Consumer  Products segment were $13,008,780
compared to $11,542,144 in the same 2003 period.  The increase was due to higher
volumes from existing clients.

Net  earned  administrative  fee  for the  International  segment  increased  to
$1,068,840  in the third  quarter 2004 from $872,352 for the same quarter in the
prior  year.  Although  sales  were  down in  Puerto  Rico due to the  Company's
severance of its relationship with an automotive  insurance  carrier,  increased
volumes from existing  clients in South America more than offset this loss.  For
the first nine  months of fiscal  2004,  the  International  segment  net earned
administrative fees were $4,030,928,  up from $2,349,422 in the same period last
year. The increase in the International  segment net earned  administrative  fee
was the result of increased  volumes from new and existing clients and increased
market  penetration  in Puerto  Rico  during the first nine months of the fiscal
year.

                                      SG&A

<TABLE>
<CAPTION>
                                FOR THE THREE MONTHS ENDED     FOR THE NINE MONTHS ENDED
                                        DECEMBER 31,                  DECEMBER 31,
                                --------------------------    --------------------------
                                    2003           2002           2003           2002
                                -----------    -----------    -----------    -----------
<S>                             <C>            <C>            <C>            <C>
Service, selling and general
  administrative                $ 7,582,779    $ 7,404,622    $23,113,507    $22,501,844
                                ===========    ===========    ===========    ===========
</TABLE>


Service,  selling and general and administrative  ("SG&A") for the quarter ended
December 31, 2003 increased $178,157, or 2%, compared to the same quarter in the
prior  year.  Employee  costs were higher at  $4,348,042  during the three month
period ended December 31, 2003, compared to $4,299,213 in the three month period
ended  December 31, 2002,  primarily due to higher health  benefit  costs.  Rent
expense also  increased  from $328,055 for the three month period ended December
31, 2002 to  $527,998  for the three  month  period  ended  December  31,  2003,
reflecting  the  Company's  move to its new corporate  headquarters  in Bedford,
Texas and resulting in an overlap of leases.

For the nine month period, SG&A increased $611,663, or 3%, compared to the prior
year nine month  period.  Employee  costs were  slightly  higher at  $13,643,948
compared to  $13,201,200  for the same  period in the prior year,  due to higher
health benefit costs and annual salary  increases.  Rent expense was up $567,734
as a result of the



                                       14
<PAGE>


overlap in leases  for the new  corporate  facility.  However,  lower  legal and
telephone  expenses  offset  some of these  increases.  Legal  expense  was down
$884,419 due to the  settlement of several  lawsuits  during fiscal period 2003.
Telephone  expenses were reduced 21%, or $248,498,  to $1,180,464 as compared to
$931,966  in the  nine  month  period  ended  December  31,  2003,  due to lower
negotiated  telephone usage rates and the elimination of data transmission lines
after the Company consolidated operations into one building.


                             PROVISION FOR BAD DEBTS

                           FOR THE THREE MONTHS ENDED  FOR THE NINE MONTHS ENDED
                                   DECEMBER 31,               DECEMBER 31,
                           --------------------------  -------------------------
                                  2003      2002            2003      2002
                                --------    ----          --------    ----
Provision for Bad Debts         $165,000      --          $425,000      --
                                ========    ====          ========    ====

The Company  increased its allowance for bad debts during fiscal year 2003 as it
anticipated  the  uncollectability  of  certain  receivables  from its  Consumer
Products segment.

                          DEPRECIATION AND AMORTIZATION

<TABLE>
<CAPTION>
                                 FOR THE THREE MONTHS ENDED  FOR THE NINE MONTHS ENDED
                                         DECEMBER 31,                DECEMBER 31,
                                 ------------------------    ------------------------
                                     2003          2002          2003         2002
                                 ----------    ----------    ----------    ----------
<S>                              <C>           <C>           <C>           <C>
Depreciation and amortization    $  718,893    $  835,427    $2,539,866    $2,880,081
                                 ==========    ==========    ==========    ==========
</TABLE>

Depreciation and amortization  expenses were reduced by $116,534, or 14%, during
three month period ended  December 31, 2003 compared to the same period for 2002
and  $340,215,  or 12%,  during the nine month  period  ended  December 31, 2003
compared  to the same  period  for  2002.  This  decrease  is the  result of the
Company's  assets maturing and the continued  reduction of capital  expenditures
for the past few years.

                                  OTHER INCOME

<TABLE>
<CAPTION>
                                 FOR THE THREE MONTHS ENDED          FOR THE YEARS ENDED
                                         DECEMBER 31,                     DECEMBER 31,
                                 ---------------------------     ---------------------------
                                    2003             2002            2003            2002
                                 -----------     -----------     -----------     -----------
<S>                              <C>             <C>             <C>             <C>
Interest and dividend income     $   532,308     $   223,975     $ 1,342,309     $   684,430
Interest expense                    (217,261)        (73,962)       (497,816)       (161,501)
Gain (loss) on sale of assets             --              --           2,976         (57,459)
Credit card usage rebate             120,000          72,000         337,177         319,348
Miscellaneous income                  49,259           6,887         192,386          10,591
                                 -----------     -----------     -----------     -----------
      Total other income         $   484,306     $   228,900     $ 1,377,032     $   795,409
                                 ===========     ===========     ===========     ===========
</TABLE>

Other  income  for three and nine  months  ended  December  31,  2003  increased
compared to the three and nine months ended December 31, 2002.  Higher  interest
income,  primarily  from the Butler  notes and loans  receivable  was  partially
offset by higher interest expense  incurred from the Company's  extended payment
terms for its insurance premium payable.  Miscellaneous  income was higher, as a
result of sublease of the Company's former location which will cease after March
2004.  Both interest  expense and interest  income should be lower in the fourth
quarter  and the  following  year as a result  of Butler  paying  down the $12.2
million Other  Receivable  and the Company not extending credit on its insurance
premiums.

                               INCOME TAX EXPENSE

                          FOR THE THREE MONTHS ENDED  FOR THE NINE MONTHS ENDED
                                  DECEMBER 31,               DECEMBER 31,
                          ------------------------    ------------------------
                             2003          2002          2003          2002
                          ----------    ----------    ----------    ----------
Income taxes expense      $  301,113    $  307,424    $  628,372    $1,101,574
                          ==========    ==========    ==========    ==========



                                       15
<PAGE>


Income taxes expense decreased $473,202 for the nine month period ended December
31, 2003  compared to the period ended  December 31,  2002,  primarily  due to a
reduction  in  income  before  taxes  and a lower  effective  tax rate  from its
International segment.

LIQUIDITY AND FINANCIAL RESOURCES

During the nine months ended  December 31, 2003,  the Company had a net increase
in cash flows from operating activities of $5,216,826,  which was primarily used
in financing activities to fund the Bulter loan and notes receivable. During the
nine months  ended  December 31,  2003,  the Company used  $391,046 in investing
activities  compared to the use of $2,224,395  in the prior year.  This decrease
results primarily from the purchase of property and equipment in the prior year,
which was related to the move by the Company into its new Headquarters facility.

Working capital was a negative $2.3 million at December 31, 2003, unchanged from
the  negative  $2.3  million at December 31,  2002.  The Company  believes  that
internally  generated  funds,  the collection on January 20, 2004 of $13,910,622
from  RWC and the $3  million  line of  credit  from  Great  American  Insurance
Company,  will be sufficient to finance its current  operations for at least the
next twelve  months.  In  addition,  the Company is  aggressively  pursuing  new
business both domestically and  internationally  to fund future working capital.
The Company plans to continue to contain its SG&A costs and utilize technologies
for operational  efficiencies  to further enhance both its operating  income and
cash flows from operating activities.

The Company has ongoing  relationships  with equipment  financing  companies and
intends  to  continue   financing   certain  future   equipment   needs  through
lease/purchase   transactions.   The  total  amount   financed   through   these
transactions during the nine months ended December 31, 2003 amounted to $487,060
compared to $115,745 during the nine months ended December 31, 2002.

Effective April 1, 2003, the Company entered into an office lease in Puerto Rico
for 3,433 square feet This lease,  which  expires  March 31, 2005,  provides for
annual rent of $61,794.  Effective  November 26, 2003,  the Company  amended its
Bedford Texas office lease to expand its leased space from 56,696 square feet to
67,811 square feet.  This lease,  which expires in February  2013,  provides for
annual rent of $1.2 million.

On December 18, 2003 the Company obtained a $200,000  irrevocable standby letter
of credit from Bank One for the benefit of its merchant  credit card  processor.
This letter of credit, issued for one year, automatically renews annually.

OUTLOOK

The Company  continues to improve customer service and technology  utilizing its
web-based platform, which provides real-time capabilities that meet the needs of
dealers, service providers and consumers. It is designed to reduce paperwork and
the  time  and  costs  of  administering  warranties  for  dealers  and  service
providers,  while  providing a better  experience  and faster  service for their
customers.  New modules for the application include Service Contract Submission,
Dealer  Sales  Analysis  and Express  Claims  Processing  The  Service  Contract
Submission module is designed for smaller dealers that typically do not generate
high volumes.  It allows them to enter contract sales and  registration  data in
"real  time" to  Warrantech  via the  Internet.  This  module is an  appropriate
complement to  Warrantech's  existing  electronic data  acquisition  modules for
medium and large-sized dealers.

Dealer Sales Analysis allows  retailers to graphically  display service contract
sales history by store location and/or product class,  charting  categories such
as retail  sales  dollars,  margin  dollars  and unit  counts.  The  information
supporting  any graphical  display can also be downloaded  for further  in-house
analysis. The Express Claims Processing feature allows service centers to submit
their repair  invoices to Warrantech  in two ways.  Claims can be keyed into the
site individually or a file of claims can be uploaded, depending upon volumes on
any given day.  Significant  enhancements  to the existing  Express  Service and
External  Servicer  Interface  modules  were  also  made.  Service  centers  can
electronically  request Warrantech to assist in locating a customer's  contract,
modify an existing contract or increase an existing repair authorization.



                                       16
<PAGE>


The Company's  Consumer Products segment expects a slight increase in net earned
administrative  fees, as a result of additional store openings by several of its
largest  customers.  To address the  weakness  in the  Automotive  segment,  the
Company recently  announced  several new warranty  programs which it anticipates
will help to reverse a recent downward trend in sales volumes.  After increasing
sales volumes during the past year, primarily as a result of its new reinsurance
program,  the Automotive segment sales volumes experienced an unexpected decline
in the prior  quarter  that is  anticipated  to continue  through the end of the
fiscal year.

The  International  Segment  continues  to  improve  its  sales  volume in South
America, which is anticipated to offset the loss of automotive volumes in Puerto
Rico. The International  segment expects to introduce a new automotive  warranty
program in Puerto Rico during the first half of next fiscal year.

SIGNIFICANT EVENTS

On September  19, 2003,  the Company  announced  that the Board of Directors had
received a proposal by its founder,  Mr. Joel San  Antonio,  to take the Company
private.   Mr.  San  Antonio's   proposal  involved  cashing  out  all  minority
shareholders  at a price of $1.65 per share by means of a reverse  stock  split.
The proposal was subject to securing financing and did not address other details
concerning the Company's capitalization.

On December 15, 2003, the Company announced that Mr. San Antonio,  had withdrawn
his proposal.  Mr. San Antonio,  in explaining  the reason for  withdrawing  the
proposal,  advised  the Board of  Directors  that he  believed  that the Company
should  focus its efforts on resolving  the  outstanding  accounting  issues and
improving the  Company's  business and  operations  in order to achieve  greater
value for its shareholders.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates
of the financial  statements  and the reported  amounts of revenues and expenses
during the reporting  periods.  Note 1 to the Company's  Consolidated  Financial
Statements set forth in the "Item 8. - Financial  Statements  and  Supplementary
Data," in the Company's  Annual Report on Form 10-K for the year ended March 31,
2003,  describes  the  significant  accounting  policies and methods used in the
preparation of the Consolidated  Financial Statements.  The following lists some
of the Company's critical accounting policies affected by judgments, assumptions
and estimates.

REVENUE RECOGNITION

Under SAB 101, the Company recognizes revenue when the revenue is realizable and
earned.  The Company  considers  revenue realized and earned when a definitively
discrete  earnings  event has  occurred.  The Company has two discrete  earnings
events (1) for marketing  and  administration  of service  contracts and (2) for
servicing fees. The marketing and  administrative fee is paid by the retailer of
the service contract.  This revenue is recognized at the time of the sale to the
retailer as the Company will have  substantially  completed  the services it has
agreed to provide in  connection  with the sale of the  service  contract to the
consumer.  The  second  discrete  earnings  event  occurs  over  the life of the
contract.  As such,  Warrantech  recognizes  and  realizes  the revenue over the
contract life.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company  assesses  potential  impairment  of its  long-lived  assets,  which
include its property and  equipment  and its  identifiable  intangibles  such as
software development costs,  goodwill and deferred charges under the guidance of
SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived  Assets." Once
annually or as events or  circumstances  indicate that an asset may be impaired,
the Company assesses potential  impairment of its long-lived assets. The Company
determines  impairment by measuring the undiscounted  future cash flow generated
by the assets,  comparing the result to the assets' carrying value and adjusting
the assets to the lower of their  carrying  values or fair  values and  charging
current operations for any measured  impairment.  At December 31, 2003 and 2002,
the Company  found no  impairment  to its  property  and  equipment or its other
identifiable intangibles.



                                       17
<PAGE>


INCOME TAXES

Deferred tax assets and liabilities  are determined  using enacted tax rates for
the effects of net operating losses and temporary  differences  between the book
and tax  bases of assets  and  liabilities.  The  Company  records  a  valuation
allowance on deferred tax assets when appropriate to reflect the expected future
tax benefits to be realized. In determining the appropriate valuation allowance,
certain  judgments are made relating to  recoverability  of deferred tax assets,
use of tax loss  carryforwards,  level of  expected  future  taxable  income and
available tax planning  strategies.  These  judgments are routinely  reviewed by
management.  At  December  31,  2003,  the Company  had  deferred  tax assets of
$2,523,278,  net of a valuation  allowance of $174,452.  For further discussion,
see Note 12 to the  Consolidated  Financial  Statements in the Company's  Annual
Report on Form 10-K for the year ended March 31, 2003.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December  31,  2003,  the Company  did not have any  derivatives,  debt or
hedges  outstanding.  Therefore,  the Company  was not subject to interest  rate
risk.  In  addition,  the risk of foreign  currency  fluctuation  was and is not
material to the Company's financial position or results of operations.

Short-term  marketable  securities  and long-term  investments  are comprised of
municipal  bonds which bear interest at fixed rates.  Interest income from these
securities  is generally  affected by changes in the U.S.  interest  rates.  The
following tables provide information about the Company's  financial  instruments
that are sensitive to changes in interest  rates.  The tables present  principal
cash flows and  weighted-average  interest rates by expected maturity dates. All
of  the  investments   are  considered   "available  for  sale."  The  resultant
differences  between  amortized  cost and fair  value,  net of taxes,  have been
reflected as a separate component of accumulated other comprehensive income.

Principal  amounts by expected  maturity as of December  31, 2003 of  marketable
securities are as follows:

<TABLE>
<CAPTION>
                                        Expected Maturity Date as of December 31,
                             ---------------------------------------------------------------
                                2004        2005       2006      2007     2008    Thereafter   Total Cost   Fair Value
                                ----        ----       ----      ----     ----    ----------   ----------   ----------
<S>                          <C>          <C>        <C>           <C>      <C>       <C>      <C>          <C>
Available for sale
  securities                 $1,635,000   $520,000   $170,000      --       --        --       $2,325,000   $2,325,000
       Interest rate              3.14%      3.75%      2.63%      --       --        --
</TABLE>


ITEM 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

The Company's  Chief Executive  Officer (CEO) and Chief Financial  Officer (CFO)
are primarily  responsible for the accuracy of the financial information that is
presented in this  Quarterly  Report on Form 10-Q.  Each of them has,  within 90
days of the  filing  date of this  Quarterly  Report,  evaluated  the  Company's
disclosure controls and procedures, as defined in the rules of the SEC, and have
determined  that such controls and  procedures  were  effective in ensuring that
material information  relating to the Company and its consolidated  subsidiaries
was made known to them during the period covered by this Quarterly Report.

INTERNAL CONTROLS

To meet  their  responsibility  for  financial  reporting,  the CEO and CFO have
established  internal controls and procedures which they believe are adequate to
provide reasonable  assurance that the Company's assets are protected from loss.
These internal controls are reviewed by the Company's independent accountants to
support their audit work. In addition,  the Company's Audit Committee,  which is
composed entirely of outside directors,  meets regularly with management and the
independent  accountants to review  accounting,  auditing and financial matters.
This Audit  Committee and the independent  accountants  have free access to each
other, with or without management being present.

THERE WERE NO SIGNIFICANT CHANGES IN THE COMPANY'S INTERNAL CONTROLS OR IN
OTHER FACTORS THAT COULD  SIGNIFICANTLY  AFFECT INTERNAL CONTROLS  SUBSEQUENT TO
THE DATE OF THE CEO'S AND CFO'S MOST RECENT EVALUATION.



                                       18
<PAGE>


                           PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

LLOYD'S UNDERWRITERS

Certain  Underwriters  at Lloyd's,  London and Other  Reinsurers  Subscribing to
Reinsurance   Agreements   F96/2992/00   and  No.   F97/2992/00  v.   Warrantech
Corporation,  Warrantech Consumer Product Services,  Inc., Warrantech Help Desk,
Inc.,  and Joel San  Antonio,  District  Court of Tarrant  County,  Texas,  17th
Judicial District.

During  the  period  that  Houston  General  was the  underwriter  of certain of
Warrantech's  programs,  it reinsured certain of the underwritten risks with one
or more Lloyd's insurance syndicates. At some point thereafter,  Houston General
commenced  an  arbitration  against  the Lloyd's  syndicates  seeking to recover
approximately  $46,000,000 under the reinsurance treaties with respect to claims
previously  paid by Houston  General on warranty  claims  submitted by customers
under  Warrantech  programs.  The  Warrantech  entities  were not parties in the
arbitration  but were the  subject  of  extensive  discovery  by each of Houston
General and the Lloyd's  syndicates.  The  arbitration  concluded in August 2002
with an award of approximately $39,000,000 in favor of Houston General.

The award  supports  the  assertions  of  Houston  General  with  respect to the
validity  of the  claims  that  it  paid.  Warrantech  was not  involved  in the
selection of these re-insurers,  has no contractual  relationship with them, and
has had no reporting  or other  obligation  to them.  Despite  these facts,  the
Lloyd's  syndicates  now seek to recover some portion of the  arbitration  award
from the Warrantech entities on two theories of liability. The first is that, at
the time  certain  claims were  presented to Houston  General for  payment,  the
Warrantech  entities either  fraudulently or negligently  represented to Houston
General that such claims were valid. The second is that the Warrantech  entities
intentionally  failed to comply with their legal  obligations  to cooperate with
the parties  during the  discovery  process for the  arbitration.  The complaint
seeks ordinary,  punitive and exemplary  damages  although no specific amount is
requested.  On January 6, 2004,  the plaintiff  filed an amended  complaint that
adds Joel San  Antonio,  Chairman  and Chief  Executive  Officer  of  Warrantech
Corporation, as a party defendant in his individual capacity.

Warrantech has filed a counterclaim  against Lloyd's arising out of the same set
of facts that underlie the original litigation. Warrantech alleges fraud, unfair
claim settlement practices and bad faith and is seeking damages of approximately
$46 million.  Warrantech is also asking that treble  damages for $138 million be
awarded as permitted under applicable Texas law.

The parties are presently engaged in extensive document discovery and the taking
of depositions.

Management believes that this case is without merit;  however, it is not able to
predict  the outcome of this  litigation.  The Company is unable at this time to
determine  the  Company's  potential  liability,   if  any,  and  as  such,  the
accompanying financial statements do not reflect any estimate for losses.

Item 2.   Changes in Securities and Use of Proceeds

          Not applicable.

Item 3.   Defaults Upon Senior Securities

          Not applicable.

Item 4.   Submission of Matters to Vote of Security Holders

          Not applicable.




                                       19
<PAGE>


Item 5.   Other Information

          Not applicable.

Item 6.   Exhibits and Reports on Form 8-K

          (a)     Exhibits

                  31.1     Certification of Chief Executive  Officer pursuant to
                           Section 302 of Sarbanes-Oxley Act.

                  31.2     Certification of Chief Financial  Officer pursuant to
                           Section 302 of Sarbanes-Oxley Act.


                  32.1     Certification of Chief Executive  Officer pursuant to
                           18  U.S.C.  Section  1350,  as  adopted  pursuant  to
                           Section 906 of Sarbanes-Oxley Act.


                  32.2     Certification of Chief Financial  Officer pursuant to
                           18  U.S.C.  Section  1350,  as  adopted  pursuant  to
                           Section 906 of Sarbanes-Oxley Act.


         (b)      Reports on Form 8-K

                  1.  Current  Report  on Form  8-K,  dated  November  6,  2003,
                  reporting,  under  Item 9,  `Regulation  FD  Disclosure,'  the
                  Company's  financial  results for the quarter ended  September
                  30, 2003.

                  2.  Current  Report  on Form 8-K,  dated  December  15,  2003,
                  reporting,  under Item 5,  `Other  Events and FD  Disclosure,'
                  that Mr. Joel San Antonio,  had withdrawn his proposal to take
                  the Company private.




                                       20
<PAGE>


                                    SIGNATURE


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                           WARRANTECH CORPORATION
                                           (Registrant)


                                           /s/ Richard F. Gavino
                                           -----------------------------------
                                           Richard F. Gavino - Executive
                                           Vice President, Chief Financial
                                           Officer, Chief Accounting Officer
                                           and Treasurer (Chief Financial
                                           Officer and Duly Authorized Officer)


Dated: February 12, 2004





                                       21